The economics of catastrophes
- Richard Zeckhauser
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Catastrophes can profitably be thought of as economic events. This essay begins by considering the consumption of catastrophes, stressing the way that we disseminate information about them, and respond, possibly on a nonrational basis. Catastrophes are produced through a combination of actions by nature and humans. Due to inappropriate incentives, human actions often exacerbate outcomes. This is particularly true in “micromotive” situations, such as the AIDS epidemic, where actions by many players produce a collectively bad outcome. Mechanisms to prevent or ameliorate catastrophes—liability, insurance, and government regulation—are considered.
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- The economics of catastrophes
Journal of Risk and Uncertainty
Volume 12, Issue 2-3 , pp 113-140
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- Kluwer Academic Publishers
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- 1. Kennedy School of Government, Harvard University, 02138, Cambridge, MA